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Choosing your preferred methods of getting paid influences your profitability and your financing. You have to identify the methods that best match your particular business operations and make it convenient for customers to use those methods. Key factors to consider are the cost of the payment process, the cost of administering it, and the delay before the money is available in your bank account.

Cash

The advantages of cash are its simplicity and zero processing cost. Small businesses often start out as cash only, especially if they sell low-cost items at the retail level. Because cash doesn't leave a trace, you have higher administrative costs and need better security. You have to keep a separate record to know how much cash you have, and you have to spend time counting it to make sure you have the right amount. For security, you have to keep it under lock and key.

Debit Cards

Debit cards are convenient for both merchant and customer, and result in instant payment with a high reliability. Fees are capped by legislation and are substantially lower than credit card fees for purchases over $10. Administrative costs are low, and you can get software that allows your accounting application to import transactions.

Credit Cards

For most merchants, credit cards cost more than debit cards but are necessary due to customer preferences. Customers don't have to pay the credit card company right away, and they may get incentives or reward points. Merchants have to pay a processing fee of several percent, but most merchant credit card accounts have many other fees that apply. In addition to monthly charges for card reader rental and account administration, there may be surcharges for many of the transactions. Merchants also face costs from compliance with privacy legislation regarding customer information.

Checks

Accepting checks carries an inherent risk, but processing costs are very low and administration is simple because each check shows up in your bank account as a separate transaction. You can reduce risk by buying a check verification system that scans the check and communicates with the customer's bank to process the payment immediately.

Online Services

Online services such as PayPal offer innovative payment processing options. Some plans include online virtual terminals where you can enter customer information and credit or debit card numbers for processing. Others offer special card readers that scan credit and debit card numbers and process the cards directly, freeing you from paperwork and privacy concerns. These services charge slightly higher rates for processing credit cards than standard processors, but have fewer additional fees.

Mobile

Payment systems using mobile phones are evolving rapidly and are worth exploring. Payment volumes are still very low, as there are several systems and comparatively few customers using them. If you want to familiarize yourself with the technology, you can sign up for systems that allow to join for free and pay per-transaction costs. Once you develop a substantial sales volume with a system, you can change to a monthly plan with lower transaction fees.

About the Author

Bert Markgraf is a freelance writer with a strong science and engineering background. He started writing technical papers while working as an engineer in the 1980s. More recently, after starting his own business in IT, he helped organize an online community for which he wrote and edited articles as managing editor, business and economics. He holds a Bachelor of Science degree from McGill University.